The Next Big Thing

Fueled by new resources, startups spring to life at UT

By Tom Gerrow

Long hours, low pay and only a small chance of success—welcome to the world of startups. But the potential to make it big, to grow something from scratch, often proves irresistible.

Seasoned entrepreneurs know the siren’s song of success and have war stories about failed ventures. They know a good idea and enthusiasm aren’t enough. Yet even with a crippled economy, the university has renewed its entrepreneurial spirit, creating an extensive support system that gives aspiring entrepreneurs who do want to take the risk their best chance at success.

Courses at McCombs, the Cockrell School of Engineering, the School of Law and other academic departments cover different aspects of entrepreneurship and how to take technologies to market. Programs like 3-Day Startup, Texas Venture Labs Investment Competition (formerly, Moot Corp) and Idea2Product help new ventures take their first steps. And others push startups further toward creating viable businesses, including Texas Venture Labs and the Austin Technology Incubator.

To see this in action we talked to the founders of three companies—each in different stages of development, but all with university roots—to find out how they used the available resources to help launch their new ventures.

Hurricane Party: An Urge to Emerge

When targeting college students as a user base for your mobile application, there is one nearly foolproof way to get them interested.

“We basically pay them to party,” says René Pinnell, one of the founders of Hurricane Party, a social networking application that helps users create spontaneous get-togethers in real time.

“If they throw a party and people show up, and they are new users, we pay them $5 a head,” Pinnell says. “It’s pretty attractive for students, and it’s good for us because it’s word-of-mouth marketing that’s pretty targeted.”

An unorthodox approach, perhaps, but successful entrepreneurs learn to do whatever it takes because, as it turns out, that’s exactly what it takes.

Pinnell, who graduated from UT in 2006 with a radio-television-film degree, had been kicking around the idea for Hurricane Party since 2009 when he started graduate school in design at the College of Fine Arts. An interest in emergent systems, where simple interactions give rise to something more complex, led him to realize that parties, like hurricanes, materialize when all the right elements come together in just the right way, at just the right time.

“I was interested in mobile application development and the way that people being highly networked can enable new ways of getting together,” Pinnell says. “That was the birthplace of the idea for Hurricane Party.”

A turning point came when he participated in 3-Day Startup, an event that gathers students from across campus to spend a weekend developing ideas for new companies. It was there that he met co-founder Eric Katerman, as well as four others now working at Hurricane Party.

Pinnell and Katerman developed their idea during the spring of 2010, and then were accepted to Capital Factory, a program launched by a group of Austin entrepreneurs that makes seed funding and mentoring available to early-stage startups. Capital Factory provided $20,000 and intense feedback from mentors who “tell you why your idea is not going to work, and what you need to do to fix it,” Pinnell says.

After Capital Factory, Pinnell and Katerman pitched their idea to investors and raised another $75,000.

“It isn’t a whole lot, but we have a really fantastic team,” Pinnell said. “All six of us have agreed to work for a year without pay.”

Hurricane Party next entered the Texas Venture Labs (TVL) program at McCombs. TVL offers startups advice from experienced entrepreneurs, provides technology and legal resources, and creates a streamlined process to get innovations to market more quickly.

“They also provided opportunities for us to pitch our company to more local angel investors and VC [venture capital] people,” Pinnell says. “It’s good to get in front of as many people as you can.”

Rob Adams, director of TVL, says raising money is never easy.

“You have to take risks,” Adams says. “And if you want financing, you have to show high viability, good market traction and a product or service that addresses a need that is urgent, pervasive and that someone is willing to pay for.”

The folks at Hurricane Party think they have identified a pervasive need: increasing traffic at local businesses, especially during off-peak times, by offering same-day deals that get people in the doors.

“It’s about execution now,” Pinnell says. “Can we execute on a marketing plan that gets people using the app, and can we execute on a sales strategy where we get businesses to sign up?”

Hurricane Party will either execute well and succeed, or stumble and fail. But Pinnell says the journey has been worthwhile, and he has no desire to return to a “normal” job.

“It’s a roller coaster, with tremendous highs and lows,” Pinnell says. “The feeling of success when you get there is better than anything else. But there is so much uncertainty, and failure is always the more likely option. You have to have insane dedication, and luckily the people we have are insanely dedicated.”

Ordoro: Feeling the Customer’s Pain

The seed for Ordoro, an e-commerce service company started last year by three McCombs 2010 MBA graduates, was planted during Jagath Narayan’s first year in the full-time program, when he worked with a small company, Child Therapy Toys.

Established by two child psychologists, Child Therapy Toys was selling therapy products online to other mental health professionals. But the business had reached a crossroads: the owners didn’t know how to grow further without outside help. They turned to the McCombs School and found Narayan and his classmates.

For Narayan, whose previous work experience had been at Fortune 500 companies, the change of pace was appealing. After investigating the business, he made an interesting discovery.

“We wanted to get data on their inventory and sales,” Narayan recalls. “And the owners didn’t have it. It was really surprising—how do you run your business like that?”

Narayan realized the tracking software the company used was outmoded and not very user-friendly. He saw an opportunity.

“Here is this guy, selling stuff online and making pretty good money, but with no good way to track what’s happening in the business. There had to be more people like that,” Narayan says.

The following semester, Narayan and his Ordoro co-founders, Sangram Kadam and Naruby Schlenker, all took the New Venture Creation course at McCombs, which focuses on evaluating business opportunities and presenting a business plan.

“We brainstormed through different ideas, and we agreed that this was one we should at least explore,” Narayan says.

Adams, who teaches the course, is a passionate advocate for talking to customers—lots of customers—to develop a clear understanding of what they want, need and will actually buy.

“We did a lot of market validation and cold-calling people, trying to figure out what their problems were,” Kadam recalls. Through this research, their original assumptions gave way to a completely new plan.

“We had this idea of an inventory optimization tool,” explains Kadam. “But when we spoke to small businesses, [we learned that] inventory optimization is two steps ahead of where they are today.” They found businesses first needed help keeping track of what’s coming in and what’s going out. “They didn’t have the infrastructure to keep that in house,” he adds.

The trio tested their idea in new venture competitions, including Moot Corp, incorporating feedback and refining their business plan. They also took part in 3-Day Startup, where they met Bart Bohn, MBA ’07, from the Austin Technology Incubator (ATI), who became an adviser.

But even after all this work, there was still a question of whether the business had a reasonable chance to succeed. By this point, they had all graduated, so it was no longer an academic exercise—if the business failed, they would need new jobs.

Ordoro was accepted for a residency at ATI, and the founders spent last summer calling prospective customers and doing more market research. They also participated in the university’s Student Entrepreneurship Acceleration and Launch (SEAL) program, which is designed to prepare student-led companies to make a “go or no-go” decision about their business.

“When we started the SEAL program, Isaac [Barchas, director of ATI] and Bart really challenged us,” Schlenker says. “Isaac compared starting a company to dating, where your partner seems more attractive to you than to the rest of world because you’re already invested in the relationship.” Barchas and Bohn urged them to look objectively at the opportunity, rather than be swayed by what they had already invested.

“By the end of summer, it was clear there was a really good opportunity here,” says Narayan. “That was basically the inception of Ordoro.”

Today the company is gaining traction and has an established base of paying customers. Narayan, Kadam and Schlenker are working to scale their processes and grow the business.

Notice Technologies: A Little Tough Love

Sometimes, you just have to wait until the time is ripe for a good idea to grow.

Notice Technologies, founded by Chris Treadaway, MBA ’04, is a social commerce middleware company that helps businesses connect with their customers via social media. The company’s origins trace back to a 2004 Moot Corp competition, where Treadaway presented an early version of the product.

It flopped.

“We finished last,” he recalls. “The pitch was horrible. The idea got thrown off kilter because we met an angel investor who changed it up, in a bad way.”

Fast forward to 2008 when Treadaway, after a stint working for Microsoft, moved back to Austin to pick up where he left off. He knew Barchus and Bohn at the ATI and approached them for help launching his new venture. Notice Technologies set up shop at ATI in May 2009.

In the years since his original idea, technology and social media have evolved significantly. Advertisers and media companies have more channels than ever to reach both current and potential customers, but the audience is highly fragmented. Therein lies the opportunity for Notice Technologies.

“We want to empower companies that have large audiences,” Treadaway says. “The old media model isn’t gone, but there are new ways for people to consume content—coupons, ads, referrals from friends. How do you bring companies from the old media realm into the new world?”

“We battle with the problem of infrastructure being un-sexy,” admits Treadaway. “But when we go into detail with a big company, we usually have something they need. In terms of doing innovative things with social media, it takes a lot of plumbing to make things easier to understand and measure. Those problems can get a little hairy, and we can get people up to speed faster.”

ATI provided the company with basic infrastructure in its early stages and offered critical feedback to help them move forward.

“For me it’s about tough love, a reality check from time to time,” Treadaway says. “We had quarterly meetings where we told them what progress we were making, and they poked holes in our business.” But now, Treadaway says, “they are trusted advisors that have become good friends. They never let us get away with any delusions.”

After incubating at ATI for two years, Notice Technologies is ready to move on, but Treadaway remains grateful for the support his company received.

“Many people don’t realize that when you start, you have nothing,” Treadaway says. “You have no process, no customers, no investors, nothing—and everybody thinks you’re crazy because you left a great lifestyle for uncertainty. When you start something from scratch, unless you do it, it won’t get done. But when you have an ATI, you have a friend to pat you on the back when you succeed and somebody to support you when times are tough, which is more the rule than the exception for the early-stage entrepreneur.”

There are no sure things for those trying to build something new—some will make it and some won’t. But by creating opportunities, connecting good ideas with talent and financing, and offering guidance along the way, the university provides what aspiring entrepreneurs need the most—a robust support system to help them reach their goals.

The greatest thing about TVL and ATI is they instill in people the idea that creating new businesses is a highly desirable and practical career. Providing the infrastructure and other resources for their start-ups certainly does help, but it's the cultural effect of evangelizing entrepreneurship which is the most beneficial.